Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129414 
Year of Publication: 
2015
Series/Report no.: 
ESRI Working Paper No. 522
Publisher: 
The Economic and Social Research Institute (ESRI), Dublin
Abstract: 
We present evidence from two experiments designed to quantify the impact of cognitive constraints on consumers' ability to identify surpluses. Participants made repeated forced-choice decisions about whether products conferred surpluses, comparing one or two plainly perceptible attributes against displayed prices. Returns to attributes varied in linearity, scale and relative weight. Despite the apparent simplicity of this task, in which participants were incentivised and able to attend fully to all relevant information, surplus identification was surprisingly imprecise and subject to systematic bias. Performance was unaffected by monotonic non-linearities in returns, but non-monotonic non-linearities reduced the likelihood of detecting a surplus. Regardless of the shape of returns, learning was minimal and largely confined to initial exposures. Although product value was objectively determined, participants exhibited biases previously observed in subjective discrete choice, suggesting common cognitive mechanisms. These findings have implications for consumer choice models and for ongoing attempts to account for cognitive constraints in applied microeconomic contexts.
Subjects: 
surplus identification
capacity constraints
bias and precision
S-ID Task
JEL: 
D11
D12
D81
D83
Document Type: 
Working Paper

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